Correlation Between Able View and Western Digital

Can any of the company-specific risk be diversified away by investing in both Able View and Western Digital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Able View and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Able View Global and Western Digital, you can compare the effects of market volatilities on Able View and Western Digital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Able View with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Able View and Western Digital.

Diversification Opportunities for Able View and Western Digital

0.08

Correlation Coefficient

Able View  Western Digital

Significant diversification

The 3 months correlation between Able and Western is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Able View Global and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Able View is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Able View Global are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Able View i.e., Able View and Western Digital go up and down completely randomly.

Pair Corralation between Able View and Western Digital

Assuming the 90 days horizon Able View Global is expected to generate 7.45 times more return on investment than Western Digital. However, Able View is 7.45 times more volatile than Western Digital. It trades about 0.29 of its potential returns per unit of risk. Western Digital is currently generating about -0.15 per unit of risk. If you would invest  1.32  in Able View Global on October 10, 2024 and sell it today you would earn a total of  0.68  from holding Able View Global or generate 51.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Able View Global  vs.  Western Digital

Able View Global

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Able View Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Able View showed solid returns over the last few months and may actually be approaching a breakup point.

Western Digital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Digital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Able View and Western Digital

The main advantage of trading using opposite Able View and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Able View position performs unexpectedly, Western Digital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Digital will offset losses from the drop in Western Digital's long position.

The idea behind Able View Global and Western Digital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.